OTTAWA/TORONTO, July 27 Zarlink Semiconductor
Inc ZL.TO has been in touch with possible new suitors as it
fends off an unwelcome $548.7 million takeover approach from
U.S. chipmaker Microsemi Corp.

Microsemi (MSCC.O), an Irvine, California-based power
management chipmaker, proposed last week to buy Ottawa-based
Zarlink for C$3.35 a share, driving shares of Zarlink to a
seven-year high even after the company said the offer was too
low.

Zarlink's chairman, Adam Chowaniec, told Reuters at the
company's annual shareholders' meeting in Ottawa that a lot of
Zarlink's partners and peers have contacted the company and
"are obviously looking to see if there's something of value to
them in this process".

Zarlink plans to conduct a strategic review of alternatives
as quickly as possible, and said it may yet seek to remain an
independent business.

Chowaniec said it was his understanding that Microsemi had
spoken with Zarlink's bankers but had not signed a
non-disclosure agreement. He said no discussions with Microsemi
were planned.

Shares in Zarlink were up 1.4 percent at C$3.66 at
mid-afternoon Wednesday, above the Microsemi offer price,
suggesting shareholders expect a higher offer to emerge.

The volume of shares changing hands since Microsemi
announced its latest approach last week means the shareholder
base has completely turned over, Chowaniec said.

BIDING TIME

One investor who has held on is Martin Ferguson, a
portfolio manager at Mawer Asset Management. Ferguson said he
thinks Zarlink should talk to Microsemi while weighing other
options.

"If you have a strategic buyer that can find synergies or
cost savings, the value of Zarlink to that buyer may be worth
more than Zarlink (is worth) on a standalone basis," he said.

He expects Microsemi to bide its time to see if other bids
emerge before deciding whether to up its bid.

Sonja Kesten, a small shareholder who hopes to get more
women on the board and in senior management, was happy that
Microsemi's bid had pushed Zarlink's shares higher but wanted
to wait to see if any higher offers emerged.

"If you're selling something, the less rush you have, the
better off you are, said BMO Capital Markets analyst Brian
Piccioni. "The flip side is there's a lot of new shareholders
who are probably keen to see a transaction ... there's an
infinite number of ways this thing could end."

It was the third proposal from Microsemi since it first
approached the Canadian chipmaker in January, when it proposed
a takeover deal that valued Zarlink at C$3 a share.

In written proposals, Microsemi has said it is willing to
pay as much as C$3.55 a share for Zarlink, pending due
diligence and confirming certain assumptions.

Zarlink said on July 22 it had hired RBC Capital Markets
and Canaccord Genuity as advisers for its strategic review of
alternatives.

Zarlink, which adopted a "poison-pill" takeover defense
strategy on Monday, said there are no assurances the review
will lead to a transaction.

Chowaniec's comments came after Zarlink reported a 77
percent drop in first-quarter net profit and said it sees
demand slowing for its communications products.
[ID:nL3E7IR2PH]

Zarlink's main communications products, including line
circuits and network timing and synchronization products, are
used by telecom and cable companies to deliver bundled voice,
video, data and mobile services.

A smaller share of its sales are in medical, where it
provides ultra low-power radios for implanted medical devices
such as pacemakers.

Next In Market News

FRANKFURT/LONDON, Dec 9 The European Central
Bank hopes its decision to confront struggling Italian bank
Monte dei Paschi at last will draw a line under a multi-year
crisis that has risked tarnishing its reputation as a credible
supervisor.

Dec 9 A former Cantor Fitzgerald & Co trader has
been indicted on charges that he defrauded investors by lying
about the price of mortgage bond transactions he handled for
them after the financial crisis in order to illegally profit.

Reuters is the news and media division of Thomson Reuters. Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Learn more about Thomson Reuters products: